The announcement follows months of due diligence work by advisers Merrill Lynch who have been looking for a buyer for Mayne Pharma since the company was spun off from its parent in November last year. The demerger was designed to make the company easier to sell.
Mayne Pharma toyed with the idea of listing on the London Stock Exchange but eventually settled on an auction process whereby a number of interested parties were shown the books. One source says these parties included European private equity group Apax Partners and Nasdaq-listed medical company Abraxis.
Mayne PharmaÆs chairman, Peter Wilcox, says Hospira offered the highest price. In recommending the deal to shareholders, he says the A$4.10 per share offer represents a 50% premium to the volume-weighted average price of the companyÆs shares since the demerger. ôWe believe this represents excellent value for the company.ö
Wilcox says boutique advisory firm Grant Samuel and Associates has been appointed to produce an independent experts report on the proposal.
Mayne Pharma produces oncology drugs and generated sales of more than A$800 million in the financial year ending June 2006. Its market capitalisation following the spin off in 2005 was $1.6 billion
Hospira is interested in Mayne Pharma because it wants to extend its global footprint. ôThe acquisition will more than double our international presence and significantly accelerate the expansion of our generic injectables business,ö says HospiraÆs chief executive officer, Christopher Begley.
Hospira is listed on the New York Stock Exchange and has been in the business of manufacturing hospital products for 70 years. The company specialises in injectables for generic acute-care and has annual sales of about $2.6 billion. It has 14 factories worldwide.
Morgan Stanley is acting for Hospira in the Australian transaction.
Mayne PharmaÆs shares closed at A$4.16 on Thursday, up from A$3.10 on Tuesday when the shares were placed in a trading halt ahead of the announcement.
In the deal fine-print, Mayne Pharma has agreed to a break fee of A$26 million to be paid to Hospira in the event that another bidder turns up with a better offer, or that the A$4.10 per share price is pronounced too high in the independent experts report.
The deal now goes before AustraliaÆs Foreign Investment Review Board and the Australian Securities and Investment Commission for approval. It will then be put to a shareholdersÆ meeting in early December where 75% of investors will need to vote in favour of the deal for it to succeed.